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Developing a Deep and Liquid Bond Market - Experience of Sri Lanka Presentation by K.G.D.D.Dheerasinghe Assistant to the Governor Central Bank of Sri Lanka.

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Presentation on theme: "Developing a Deep and Liquid Bond Market - Experience of Sri Lanka Presentation by K.G.D.D.Dheerasinghe Assistant to the Governor Central Bank of Sri Lanka."— Presentation transcript:

1 Developing a Deep and Liquid Bond Market - Experience of Sri Lanka Presentation by K.G.D.D.Dheerasinghe Assistant to the Governor Central Bank of Sri Lanka

2 Development of the Bond Market Events of Significance b Issue of loans commenced under the Colonial Treasury Bill Ordinance by Crown Agents in U.K. b Issue of Rupee Loans commenced under RSSO No.7 of 1937 b Issue of Treasury Bills commenced under LTBO (Chapter 287) b Public debt management was vested with the Central Bank under the Monetary Law Act.  A secondary market window was opened for Treasury Bills by the Central Bank. b Weekly Treasury Bill auctions commenced b Primary Dealers were appointed.

3 Development of the Bond Market contd... b Repo window for Treasury Bills was introduced by the CBSL. b Primary Dealer system was recognised. b Non-competitive bidding at primary auctions was phased out. b Reverse Repo window was introduced by the CBSL. b RSSO, LTBO and MLA were amended to enable scripless issue of Treasury Bills and Treasury Bonds. b Issue of Treasury Bonds commenced.  Dedicated Primary Dealers were appointed b Primary Dealer supervision commenced.

4 Development of the Bond Market contd... b US Dollar denominated Sri Lanka Development Bonds were issued. b Fiscal Management Responsibility Act was enacted. b Issue of 10,15 & 20 year Treasury Bonds commenced.  Bloomberg Bond Trading System for Primary Dealers was introduced. b RSSO,LTBO & MLA were amended to enable the trading of scripless securities. b Scripless Securities Settlement System (SSSS) and Central Depository System (CDS) commenced operations.

5 Legal Framework ( a) Appropriation Act - Authority for annual borrowing limit - Authority for annual borrowing limit (b) Local Treasury Bills Ordinance - Issuence of T-Bills - Issuence of T-Bills (c ) Registered Stock & Securities Ordinance - Issuence of T-Bonds & Rupee Loans - Issuence of T-Bonds & Rupee Loans (d) Foreign Loans Act - Borrowing from foreign sources - Borrowing from foreign sources (e) Monetary Law Act - Debt management as a function of Central - Debt management as a function of Central Bank Bank (f) Fiscal Management Responsibility Act - Guidelines and debt sustainability - Guidelines and debt sustainability

6 Organizational Framework c PARLIAMENT - authority to borrow and accountable to the public - authority to borrow and accountable to the public c MINISTER OF FINANACE - delegates authority to Central Bank - delegates authority to Central Bank c MINISTRY OF FINANCE / TREASURY-Principal - authority & accountability - authority & accountability - Contracting non-commercial foreign borrowing - Contracting non-commercial foreign borrowing c CENTRAL BANK - Agent - Iisuence and debt service c PRIMARY DEALERS - market making b BANKS, PENSION/PROVIDENT/INSURANCE FUNDS - Investors and Secondary Market Dealers - Investors and Secondary Market Dealers

7 Implementation of the Government Securities Programme è Preparation of the borrowing calendar è Release of information to the market è Regular meeting of the Debt Management Committee ( weekly) è Regular meeting with Primary Dealers (weekly)  Issuance of domestic debt: e.g. Auction, Tap, Placements

8 Organization of Public Debt Department ä Front Office - market/public relations, primary issuance, market information, investor awareness market information, investor awareness ä Middle Office - research inputs, risk analysis, issuance techniques, product development, techniques, product development, database database ä Back Office - payment and settlement, servicing of concessional foreign debt, CS-DRMS concessional foreign debt, CS-DRMS ä Support Services- human resources, training, IT support, maintenance. maintenance.

9 Budget Deficit and Borrowing Requirement (as a % of GDP) b Total Revenue b Total Expenditure b Overall Deficit b Finanacing Foreign Foreign Domestic Domestic Other/Privatization Other/Privatization

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16 Secondary Market - - Participants - Participants - Ownership Structure - Ownership Structure - Taxation Policy - Taxation Policy - Yield Curve - Yield Curve

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18 Bond Market Infrastructure b Online Electronic Bidding System b Real Time Gross Settlement System b Scripless Securities Settlement System b Bloomberg Bond Trading System b Colombo Stock Exchange - DEX System

19 Transaction Numbers and Volumes of the SSS System Period Number of Transactions Volume (Rs. Mil) February –2004 5,696 5, , , March – , , , April – , , , May – , , , Total43,0662,106, Source:CDS,PDD, Central Bank of Sri Lanka

20 Growth of Depository Accounts of CDS Period No:Of Accounts February – ,893 March – ,483 April – ,781 May – ,846 Source: CDS,PDD,Central Bank of Sri Lanka

21 Regulatory Framework b Licencing of Primary Dealers b Primary Dealer Supervision - On Site Examination - On Site Examination - Off Site Surveilance - Off Site Surveilance b Regulations, Directions and Guidelines

22 The End The End Thank You !


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